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TMI Blog2023 (12) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... ure was careful enough to identity who all will fall within the category of nominees who in law will be considered as a beneficiary nominee. While categorizing those persons, the legislature was careful enough to bring in the parents, spouse, children, spouse and children or any of them. If the legislature had thought it fit to make everyone as a beneficiary nominee, there was no need for the legislature to specifically prescribe those persons who will fall within the ambit of Section 39 (7) of the Insurance Act, 1938. The fact that such a conscious description of persons, who fall under Section 39(7) of the Act has been prescribed by the legislature, shows that the legislature only wanted those persons who are closely related to the deceased policy holder alone to be treated as beneficiary nominees. In the instant case, the third respondent is admittedly the brother of the deceased policy holder and the third respondent cannot be brought within the scope of Section 39(7) of the Act. If the third respondent cannot be brought within the scope of Section 39(7) of the Act, it would only mean that he will be treated as a collector nominee. The concept of nomination is only to ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b Athiff (For R-3) ORDER This Writ Petition has been filed challenging the impugned communication dated 24.06.2021 of the second respondent informing the petitioner that the insurance claim amount will be paid only in favour of the nominee and for a consequential direction to the first and second respondents to disburse the assured claim amount to the petitioner and her son, who are the legal heirs of the deceased S.Arul. 2. The case of the petitioner is that she got married to late S.Arul in the year 2016 and through this marriage, they had a son named Aswath. The husband of the petitioner was infected with Covid-19 and unfortunately, he died on 13.05.2021. The husband of the petitioner had subscribed a LIC policy with the second respondent for the sum assured at Rs. 3,00,000/- (Rupees Three Lakhs only). After the demise of the husband, the petitioner made a claim for the sum assured. On receipt of the communication from the petitioner, the second respondent through impugned letter dated 24.06.2021 informed the petitioner that the deceased had nominated his brother, viz., the third respondent/S.Muthuvel Raj as the nominee and therefore, the claim will be paid only in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his or her capacity as a collector nominee and insofar as the claim over the sum assured, the parties are relegated back to the personal law which governs them. Therefore, in many cases, the collector nominee merely retains the amount in trust, subject to working out the final claim between the parties before the competent Court. An amendment was brought to the Insurance Act, 1938 in the year 2015. By virtue of this amendment, the line that was drawn between a beneficiary nominee and collector nominee stood almost obliterated. The nominee about whom Section 39 of the Insurance Act, 1938, talks about is considered to be a beneficiary nominee and the concept of collector nominee has been done away with. To properly understand the position of law, it will be appropriate to extract Sub Sections 7 to 10 of Section 39 of the Insurance Act, 1938, hereunder: 39. Nomination by Policy holder:- (1)... (7). Subject to the other provisions of this section, where the holder of a policy of insurance on his own life nominates his parents, or his spouse, or his children, or his spouse and children, or any of them, the nominee or nominees shall be beneficially entitled to the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to policies which have matured in 2018, post the 2015 Amendment. 19. Learned counsel for the Appellants relied upon the judgement of Rajasthan High Court in Ramgopal Ors. vs. General Public Ors., S.B. Civil Misc. Appeal No. 27/2018 decided on 05.04.2019, wherein according to her, judgement in Sarbati Devi (supra) was distinguished in view of the 2015 Amendment and Court held that wherever the provisions of amended section 39 will be applicable, beneficial nominee shall be entitled to the benefits under the insurance policies, to the exclusion of any other legal heir, who is not a nominee. 20. Per contra, Mr. Rakesh Wadhwa learned counsel for Respondent No. 1 opposed the appeal and submitted that the partial decree has been rightly passed by the Trial Court on an application under Order XII Rule 6 CPC. Drawing the attention of the Court to the said provision, learned counsel argued that based on admission of facts in the pleadings or otherwise, orally or in writing, it is open to the Court, at any stage of the suit, without waiting for determination of any other question between the parties, to make such order or give a judgment, having regard to the admissions. Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hboo Gupta Vs. The Life Insurance Corporation of India Ors. CWJC No. 12012 of 2018 : (AIR Online 2019 PAT 1526) decided on 25.09.2019. vi. Oswal Greentech Ltd. Vs. Mr. Pankaj Oswal Ors. CA No. 410 of 2018 decided by National Company Law Appellate Tribunal, Delhi on 14.11.2019. vii. S. Shafeek Ors. Vs. State of Kerala 2020 SCC Online Ker 636. viii.Smt. Ramayee Vs. the Principal Comptroller of Defence and others. W.P. (MD). No. 18544 of 2016 decided on 17.02.2020. 27. The proposition of law laid down by the Supreme Court in Sarbati Devi (supra) and relied upon by counsel for the Respondent cannot be disputed and is a binding dictum. The Supreme Court held that nomination would not confer any beneficial interest on the nominee under an insurance policy and a nominee is only an authorized hand to receive the insurance amount, which is subject to be disbursement amongst the legal heirs under the law of succession, governing the parties. In fact, the said judgment has been followed subsequently in a long line of judgments not only by this Court but different High Courts from time to time. Relevant paras of Sarbati Devi (supra) are as under:- 5. We shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act which provides for transfer or assignment of the rights under a policy, the tenuous character of the right of a nominee would become more pronounced. It is difficult to hold that Section 39 of the Act was intended to act as a third mode of succession provided by the statute. The provision in sub-section (6) of Section 39 which says that the amount shall be payable to the nominee or nominees does not mean that the amount shall belong to the nominee or nominees. We have to bear in mind here the special care which law and judicial precedents take in the matter of execution and proof of wills which have the effect of diverting the estate from the ordinary course of intestate succession and that the rigour of the rules Patna High Court CWJC No. 12012 of 2018: ( AIR Online 2019 PAT 1526) dated 25-09-2019 governing the testamentary succession is not relaxed even where wills are registered. xxx xxx xxx 8. We have carefully gone through the judgment of the Delhi High Court in Uma Sehgal case [AIR 1982 Del 36 : ILR (1981) 2 Del 315]. In this case the High Court of Delhi clearly came to the conclusion that the nominee had no right in the lifetime of the assured to the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d his wife in the insurance policy. K died. It was held that in virtue of the nomination, the mother of K was not entitled to any portion of the insurance amount. xxx xxx xxx 12. Moreover there is one other strong circumstance in this case which dissuades us from taking a view contrary to the decisions of all other High Courts and accepting the view expressed by the Delhi High Court in the two recent judgments delivered in the year 1978 and in the year 1982. The Act has been in force from the year 1938 and all along almost all the High Courts in India have taken the view that a mere nomination effected under Section 39 does not deprive the heirs of their rights in the amount payable under a life insurance policy. Yet Parliament has not chosen to make any amendment to the Act. In such a situation unless there are strong and compelling reasons to hold that all these decisions are wholly erroneous, the Court should be slow to take a different view. The reasons given by the Delhi High Court are unconvincing. We, therefore, hold that the judgments of the Delhi High Court in Fauza Singh case [ AIR 1978 Del 276] and in Uma Sehgal case [AIR 1982 Del 36 : ILR (1981) 2 Del 315] do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death. (6) Where the nominee or if there are more nominees than one, a nominee or nominees survive the person whose life is insured, the amount secured by the policy shall be payable to such survivor or survivors. (7) Subject to the other provisions of this section, where the holder of a policy of insurance on his own life nominates his parents, or his spouse, or his children, or his spouse and children, or any of them, the nominee or nominees shall be beneficially entitled to the amount payable by the insurer to him or them under sub-section (6) unless it is proved that the holder of the policy, having regard to the nature of his title to the policy, could not have conferred any such beneficial title on the nominee. (10) The provisions of sub-sections (7) and (8) shall apply to all policies of life insurance maturing for payment after the commencement of the Insurance Laws (Amendment) Act, 2015. (11) Where a policyholder dies after the maturity of the policy but the proceeds and benefit of his policy has not been made to him because of his dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision itself between a beneficial nominee and a collector nominee. (b) It is not possible to agree to the suggestion made by some of the insurers that in all cases the payment to the nominee would tantamount to a full discharge of the insurer's liability under the policy and that unless the contrary is expressed, the nominee would be the beneficial nominee. (c) An option be given to the policyholder to clearly express whether the nominee will collect the money on behalf of the legal representatives (in other words such nominee will be the collector nominee) or whether the nominee will be the absolute owner of the monies in which case such nominee will be the beneficial nominee. (d) A proviso be added to make the nomination effectual for the nominee to receive the policy money in case the policyholder dies after the maturity of the policy but before it can be encashed. Suggested Amendment of Section 39:- 7.1.15 To give effect to the above recommendations, the Law Commission is of the view that s.39 be recast as follows: xxx xxx xxx (7) Subject to the other provisions of this section, where the holder of a policy of insurance on his own life ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in mind, sub-section (7) of Section 39 was carefully and cautiously drafted and the words used by the legislature are 'beneficial interest'. 7. A careful reading of the above Judgment brings to light the fact that the dictum of the Hon'ble Apex Court in Sarbati Devi case to the effect that a mere nomination would not confer any beneficial interest on the nominee under an insurance policy, has undergone a change by virtue of the amendment that was brought in by the Parliament to Section 39 of the Insurance Act, 1938. Before this amendment was brought in, the Law Commission had also submitted its views and the Law Commission wanted to specifically carve out the distinction between the beneficiary nominee and the collector nominee. However, when the legislature amended Section 39 of the Insurance Act, 1938 and brought in Sub Sections 7 and 8, the very concept of collector nominee has been done away with. This was taken into consideration by the Delhi High Court and considering the facts and circumstances of that case, the nominee, who was appointed under the Policy was held to be a beneficiary nominee and was hence, entitled to appropriate the entire sum assured. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the category of nominees who in law will be considered as a beneficiary nominee. While categorizing those persons, the legislature was careful enough to bring in the parents, spouse, children, spouse and children or any of them. If the legislature had thought it fit to make everyone as a beneficiary nominee, there was no need for the legislature to specifically prescribe those persons who will fall within the ambit of Section 39 (7) of the Insurance Act, 1938. The fact that such a conscious description of persons, who fall under Section 39(7) of the Act has been prescribed by the legislature, shows that the legislature only wanted those persons who are closely related to the deceased policy holder alone to be treated as beneficiary nominees. In the instant case, the third respondent is admittedly the brother of the deceased policy holder and the third respondent cannot be brought within the scope of Section 39(7) of the Act. If the third respondent cannot be brought within the scope of Section 39(7) of the Act, it would only mean that he will be treated as a collector nominee. The Insurance Company cannot deal with the inter-se rights and the claim between the petitioner an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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